CHOW WAI KIT AND ANOTHER v. CHAK HON WAI

HCA No. 13502 OF 1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13502 OF 1999

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ASSESSMENT OF DAMAGES

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1. This is an assessment of damages upon repudiation of a tenancy agreement by the Tenant, the defendant. Interlocutory judgment for damages to be assessed was entered on the 23rd February 2000.

The Facts

2. The 2nd named plaintiff, (hereinafter referred to as "Wong"), gave evidence on behalf of the plaintiffs. The plaintiffs are the registered owners of the premises known as Flat F, 29th Floor, Block 1, Sea Crest Villa Phase 4, No. 44 Castle-Peak Road, Tsing Lung Tau, New Territories erected on Tsing Lung Tau Lot No. 64 (hereinafter referred to as "the suit premises").

3. The plaintiffs as landlord entered into a Tenancy Agreement in Chinese writing dated 20th December 1997, (hereinafter referred to as the "said Agreement"), with the defendant (hereinafter referred to as "the Tenant"), wherein the Tenant agreed to let the said premises for a term of 2 years from the 1st January 1998 to the 31st December 1999 at the rent of HK$9,000.00 per calendar month inclusive of rates and Government rent payable in advance on the 1st day of each calendar month.

4. By Clause 3 of the said Agreement the defendant agreed to pay rent punctually on the 1st day of each month.

5. Clause 6 of the said Agreement, the defendant agreed to pay all miscellaneous charges, elevators expenses, pump expenses cleaning expenses and caretakers expenses - by which it would seem that the aforesaid refer to all management fees, as well as water and electricity charges.

6. Clause 11 state that the term of the said Agreement is two years, the first year being a fixed term, whilst the 2nd year is open to earlier termination. Either party could terminate the tenancy in the open term i.e. second year, upon two months prior notice given to the other party.

7. In breach of Clauses 3, 6 and 11 of the Agreement, the Tenant informed Wong on a day in June 1998 that he wished to vacate the said premises and asked to use the two months' rental deposit in payment of rent for July and August. Wong requested him to complete the one year's fixed term. The Tenant stated that he could not do so. On a day in July, Wong telephoned the Tenant again and the Tenant stated that he would not live in the suit premises any more as he had purchased a property wherein he will live with his mother. The Tenant failed to pay rent in July and August. Some time after August, Wong telephoned 香港置業, an estate agent, and discovered that the Tenant had handed the keys of the suit premises to them. The Tenant had failed to pay rent since July 1998. The Tenant also failed to pay management fee since July 1998 in the sum of $1,089 per month. He also failed to pay gas charges in the sum of $580, electricity charges in the sum of $1,227 and telephone charges in the sum of $89. Receipts for management fee for the months of July, August, September and October, receipt for gas charges, receipt for electricity charges were produced marked Exh P2. Wong also produced the Tenancy Agreement marked Exh P1.

8. Wong stated that she would claim damages for all loss suffered in respect of the Tenants repudiation of the said Agreement for the period up to the expiration of the fixed term of the tenancy namely the 1st year thereof.

Mitigation of Loss

9. Wong stated that immediately upon realization that the Tenant had vacated the premises by depositing the keys of the premises with the said estate agent, Wong authorized estate agent to let the property out for them. The property market was flat and there were few enquirers. The 1st Enquirer offered to rent the premises at $6,500 per month inclusive of rates. Even though the offer was made on a date in October, the term of the tenancy was to commence on the 15th December 1998. There was a substantial wait before the commencement date of the tenancy with loss of rental during the waiting period. The property market continued to fall. The rental market was flat. A 2nd Enquirer offered to rent the premises as a furnished letting at $8,000 per month but required the re-decoration of the premises by the plaintiffs at their expense before the letting. Wong stated that the costs of such re-decoration and the purchase of new furniture to furnish the suit premises would have come to $20,000 odd. At the time the plaintiffs were not willing to pay for such to let the premises. The commencement date of the tenancy, even were the offer to be accepted would not have been any earlier than the commencement date of the term of the 1st offer. Re-decoration of the premises would take about 2 weeks to complete. It was not until August 1999 that the plaintiffs finally let the premises as a furnished letting after re-decoration of the suit premises and purchase of new furniture, at a monthly rental of $7,000 p.m. inclusive of rates and management fees.

Damages

10. It would seem from the facts that the Tenant repudiated the said Agreement by firstly refusing to pay the rent for July and August and insisting that these be recovered from the 2 months' deposit. He then vacated the premises sometime before September 1998 or thereabouts without the plaintiffs' consent. He did not surrender the keys of the premises to the plaintiffs but left them with the estate agent. The Landlord had not approved the repudiatory acts of the Tenant and his abandonment. However in order to mitigate their loss, the plaintiffs authorized estate agents to re-let the premises at the earliest possible date. In so doing they elected to accept the repudiation and treat the tenancy as terminated. They are entitled to damages for their loss. Should the plaintiffs have mitigated their loss by accepting the offer of the 1st Enquirer to rent the premises at $6,500 p.m. inclusive of rates and management fees with a term to commence on the 15th December 1998? The offer of the 1st Enquirer, was made on a date in October, on condition that the tenancy would commence on the 15th December 1998 more than 1.5 months later. As this condition in the offer would have caused the plaintiffs loss of rental for at least 1.5 months waiting for the commencement date of the term, it is in my view not unreasonable that the plaintiffs to allow this offer to lapse hoping for a better offer. I do not think it is unreasonable for them not to accept this offer as it is only from hindsight that we are able to know that the rental market continued to slump. At the time the plaintiffs would have hoped for a better offer. The offer of the 2nd Enquirer would not have enabled the plaintiffs to mitigate loss as it required such substantial expenditure before the premises could be re-let. Hence, I am satisfied that they are entitled to damages for their loss without mitigation.

11. I am satisfied that they are entitled to damages as follows:-

Loss of rental from 1st July 1998 to 31st December 1998 at $9,000 p.m.	$54,000.00
Management fees from 1st July 1998 to 31st December 1998	6,534.00
Electricity charges	1,227.00
Gas charges	580.00
Telephone charges	89.00
	$62,430.00

12. The plaintiffs had agreed to give credit for the rental deposit in the sum of $18,000. After deducting the amount of the rental deposit, damages are assessed in the sum of $44,430.

13. I therefore give final judgment to the plaintiffs in the sum of $44,430 together with interest thereon at judgment rate from date of writ on 19th August 1999 to date of judgment and thereafter until payment together with costs of the assessment to be taxed if not agreed.